BC Tourism Labour Shortage Economic Impact Study Summary ...€¦ · BC Tourism Labour Shortage...

BC Tourism Labour Shortage Economic Impact Study

Summary Report May 2016

Prepared by Grant Thornton and Econometric Research Limited

Grant Thornton LLP Suite 1600, Grant Thornton Place 333 Seymour Street Vancouver, BC V6B 0A4

T (604) 687-2711 F (604) 685-6569 www.GrantThornton.ca

Audit • Tax • Advisory Grant Thornton LLP. A Canadian Member of Grant Thornton International Ltd

Dear Ms. Yule:

Re: BC Tourism Labour Shortage Economic Impact Study Summary Report

In accordance with the terms of our engagement, we have completed the BC Tourism Labour Shortage

Economic Impact Study for go2HR. There are two reports related to this study:

A detailed, Technical Report; and

An abbreviated, Summary Report.

This is the Summary Report.

This report has been prepared for go2HR to demonstrate the estimated impacts resulting from tourism

labour shortages in British Columbia. The information contained within this report should not be used

for any purpose other than that disclosed herein.

We thank you for your co-operation and assistance during this assignment and appreciate the

opportunity to work with you. If we may be of any further assistance, please contact us at your

convenience.

Yours sincerely,

Doug Bastin, CMC Partner, Grant Thornton Consulting

May 31, 2016

Debbie Yule Vice President, Labour Market Strategy go2 Tourism HR Society Suite 450, One Bentall Centre 505 Burrard Street, P.O. Box 59 Vancouver, BC V7X 1M3

Dear Ms. Yule


go2HR BC Tourism Labour Shortage Economic Impact Study Summary Report May 2016

Contents

Acknowledgements and Disclaimer

Introduction 1

Introduction 1

Study Approach 3

Study Approach 3

Survey Highlights 4

Introduction 4

Profile of Respondents 4

Key Findings from the Survey 7

Impacts of Labour Shortages 9

Conclusions 10

Economic Impact Losses Due to Labour Constraints 11

Introduction 11

Analysis 1: Total Tourism Impacts in BC Assuming Minimal Labour Constraints 11

Analysis 2: Tourism Economic Impacts and Losses Based on Labour Constraints 12

Conclusions 14

Appendix A – Economic Impact Methodology and Key Terms

Background on Tourism Expenditures

Approach to Estimating Direct, Indirect and Induced Impacts

Economic Impact Analysis Methodology

Appendix B – Survey

Appendix C – Limitations

Appendix D – Sector Associations & RDMOs



Acknowledgements and Disclaimer

Acknowledgements

go2HR wishes to acknowledge the tremendous efforts of the many individuals and organizations from

across British Columbia that contributed to this study. The Sector Labour Market Partnerships

Program and the Ministry of Jobs, Tourism and Skills Training provided critical support throughout the

process in terms of both financial and human resources. The support of tourism and hospitality sector

associations and their members and stakeholders was invaluable. These individuals provided insights

with regard to the extent of labour shortage issues and their implications on businesses throughout the

province. This information was provided both through interviews and participation in an industry-wide

on-line survey. Appendix D provides a list of the associations and regional destination marketing

organizations that supported this study.

Disclaimer

The views and opinions expressed in this report are those of its author(s) and not the official policy or position of the Government of British Columbia.


1 go2HR BC Tourism Labour Shortage Economic Impact Study Summary Report May 2016

Introduction

Introduction

During 2013/2014, the demand for workers in the BC tourism industry started to exceed supply

significantly. The demand-supply gap is projected to increase well into the future.

Many tourism and hospitality businesses in BC have expressed considerable concern about the impacts

of labour shortages on their businesses. In a 2014 study, the following types of impacts resulting from

labour shortages were reported: 1

Reduced customer service;

Staff burnout;

Lost revenue;

Missed business opportunities;

Increased business costs;

Increased overtime; and,

Reduced business hours of operations.

To date, a study that validates and quantifies the economic impacts of these shortages on the industry

and the province has not been conducted. To address this, go2HR engaged Grant Thornton and

Econometric Research Limited to quantify the potential economic impacts on the BC tourism industry

arising from labour shortages. The study was conducted from December 2015 to May 2016.

The study first identifies, quantifies, and presents the economic contributions of tourism to the

provincial economy, assuming minimal labour shortages. It then estimates the impacts (lost direct

expenditures and associated indirect and induced impacts) resulting from the inability of BC tourism

operators/ businesses to hire all the people they need to operate at full capacity.

Overall, the study confirms that BC’s tourism industry is facing labour constraints that are impacting

businesses. Just over 50% of those surveyed for this study indicated that they could not hire all the

people they needed to run their business at full capacity and/or expand their business in 2014.

Examples of how businesses were challenged emerged through interviews and the industry survey that

were conducted to support this study. Examples of challenges that respondents provided in their

responses to open-ended questions are listed below.

Some river rafting and kayaking operators could not offer all the trips that visitors were seeking

due to a shortage of qualified guides.

1 Sentis Market Research Inc., Temporary Foreign Worker Program Survey of Employers, commissioned by go2HR, September 2014.



Some restaurant managers indicated that they had to close down for one shift (breakfast, lunch

or dinner) or had to shut down for one extra day per week due to a shortage of servers and/or

cooks.

Some hoteliers reported that they had to shut down the wing of a hotel due to a shortage of

housekeeping staff, and other hotel workers.

Some businesses could not respond to all visitor requests, possibly missing reservations as a

result.

Some operators had to forgo opportunities to expand their business and/or open a new

business due to uncertainties about their ability to hire enough staff.

Some restaurant managers indicated that they had to turn down business, such as requests for

catering services.

Some management indicated that, due to a shortage of servers, they were forced to assist on

“the floor”, taking management away from key activities, such as participating in important

business development activities.

The study estimates that the inability of these businesses to operate at full capacity due to labour

shortages resulted in an estimated $918 to $1,030 million in lost tourism spending (or gross revenue)

across the province. This, in turn, resulted in much larger losses, when indirect and induced economic

impacts are considered. Impacts are also felt with regard to lost taxation revenue for all three levels of

government.

There are two reports related to this study:

A detailed, Technical Report; and

An abbreviated, Summary Report.

This is the Summary Report.



Study Approach

Study Approach

The study approach is highlighted below.

Study Component Description

Secondary Research

Review

Relevant reports and data were reviewed as background and to

ascertain their potential use in the analysis.

Primary Data

Collection

Telephone interviews were conducted with over 30 representatives

from regional and municipal destination marketing organizations and

tourism sector associations to gain a better understanding how labour

constraints (shortages) are impacting businesses and tourism

operations.

An online survey was designed and implemented to collect primary

data from tourism businesses and organizations across the province.

The survey results were cleaned, validated, filtered and analyzed to

support the economic impact analysis.

A total of 462 valid survey responses were used to support the

analysis.

Economic Impact

Analysis

The economic impact analysis was conducted based on two key

assumptions:

Assuming there were no significant labour constraints –The base year used

was 2013, as this was prior to the year that industry started

experiencing significant labour constraints and for which data was

available from BC Statistics.

Assuming various levels of labour constraints – This was completed using

the results of the online industry survey. This was completed at the

sector, provincial, and at the regional level and on a year-round versus

seasonal basis.

Reporting The results were documented in a report format.



Survey Highlights

Introduction

The online survey was conducted from January 12th to February 19th, 2016. Over 600 online survey

responses were initially received. After the responses were cleaned, validated and filtered, a total of 462

valid responses were used for this study.

Profile of Respondents

Year Round versus Seasonal Operations

Almost three quarters (73.8%) of respondents operated on a year-round basis versus 26.2% that

operated seasonally. Of the businesses that operated seasonally, the majority of respondents indicated

they operate in one or more of the following months: May, June, July, August and September.

Figure 1: Percentage of Respondents that Operate Year Round & Seasonally

Source: go2HR BC Tourism Labour Shortage Economic Impact Survey, Grant Thornton, 2016. N = 462

Tourism Regions

Respondents were asked to indicate in which of the six tourism regions they operate. It is important to

note that 29 of the respondents operate in more than one region, which explains the total percentage

exceeding 100%.

73.8%

26.2%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

Year Round (12 Months) Seasonal



Figure 2: Regions in which Businesses Operate

Source: go2HR BC Tourism Labour Shortage Economic Impact Survey, Grant Thornton, 2016. N= 462

Tourism Sectors

Figure 3 provides a breakdown of respondents by each of the six sectors that go2HR uses for its

tourism sector classification. 40% of respondents operate in the accommodation sector, followed by

recreation and entertainment (27.9%) and food and beverage (17.3%). Note that respondents were

asked to indicate the “primary” sector in which they operate. For example, a sport fishing operation

would indicate that its primary sector is recreation and entertainment, even though the operation may

also offer overnight accommodation and food and beverage services.

Figure 3: Primary Sector (go2HR sector categories)

Source: go2HR BC Tourism Labour Shortage Economic Impact Survey, Grant Thornton, 2016.

N= 462

Business Type

Over 43% of respondents represented private corporations, while close to 20% represented sole

proprietorships, and 15.2% represented a partnership and non-profit society.

BC Tourism Regions



Figure 4: Business Type


N= 462

Respondents were asked to further describe the type of business or operation they represent. The

range of operations is shown below.

Figure 5: Range of Business Operations


N= 462



Gross Revenue

Respondents were asked to indicate their gross annual revenue by selecting the gross revenue category

that applies to their business. Over 28% of respondents reported that they generate less than $250,000

in gross revenue annually, while over 17% reported that they generate over $3.0 million in gross

revenue annually. The remaining respondents (55%) generate annual gross revenue of between

$250,000 and $2.75 million. This response indicates that the survey captured businesses of varying

sizes based on gross revenue. Figure 6 provides a summary of respondents by annual gross revenue.

Figure 6: Annual Gross Revenue of Respondents (2014)


Key Findings from the Survey

Hiring Challenges

Respondents were asked if they were able to hire all the people they needed in 2014. The response was

split almost equally, with 50.9% stating they were unable to hire all the people wanted, and 49.1%

indicating that they were able to hire all the people they wanted in 2014.

Figure 7: Ability to Hire All Staff Required (2014)




Number and Types of Unfilled/Vacant Positions

A total of 225 respondents were unable to hire additional staff in 2014. The table below highlights the

number of respondents who were unable to hire required staff based on the groupings by number of

employees they could not hire. The majority of respondents (56.45%) were unable to hire between 1-4

staff. The average within this grouping was approximately 2.25 employees. 16% of respondents were

unable to hire between 5-9 employees while 19.56% were unable to hire between 10-24 employees.

The average within these groupings was 6.02 and 12.93 respectively. Only three respondents were

short of 100 or more employees.

Table 1: Number of Unfilled Positions (2014)

Number of People Unable

to Hire

Number of Respondents

Proportion of Total

Average Number of People Unable

to Hire

1-4 127 56.45% 2.25

5-9 36 16.00% 6.02

10-24 44 19.56% 12.93

25-49 13 5.78% 30.15

50-99 2 0.89% 63.00

100+ 3 1.33% 133.33

225 100%


The majority of unfilled positions were estimated to be in the Lower Skilled Worker category (56.6%),

while 30.7% were in the Higher Skilled Worker Category and 12.6% were in the Manager category;

additional detail on vacant types of positions is provided in Figure 8.

Table 2: Unfilled Positions by Category (2014)

Unfilled Position Categories Number of

Unfilled Positions (#)

Percent of Unfilled

Positions (%)

Managers2 225 12.6%

Higher Skilled Workers3 619 30.7%

Lower Skilled Workers4 1,142 56.6%

Total 2,016 100.0%


2 Examples of Managers include Food and Beverage Manager, Front Office Manager, Human Resources Manager, etc. 3 Examples of Higher Skilled Workers include Ski Instructor, Chef, Pilot, Accountant, etc. 4 Examples of Lower Skilled Workers include House Keeping Room Attendant, Bell Person, etc.



Figure 8: Types of Unfilled Positions (2014)


Impacts of Labour Shortages

The most reported impacts to respondents’ businesses due to the labour shortage were staff burn-out

(71.4%), hiring under-qualified staff (70.5%), reduced customer service (54.6%), and missed business

opportunities (47.8%).

Figure 9: Impacts due to Labour Shortages (2014)


36.0%

9.8%

21.8%

17.3%

4.0%

39.6%

17.3%

37.8%

32.4%

7.1%

25.8%

21.3%

12.4%

4.9%

15.1%

3.1%

16.9%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

54.6%

42.2%

35.7%

71.4%

21.5%

47.8%

23.3%

70.5%

4.7%

11.8%

0.0%

20.0%

40.0%

60.0%

80.0%



Respondents were asked to estimate the amount of revenue they lost in 2014 due to the inability to hire

the complement of staff they needed to meet demand for their product/services. Just over half of the

respondents to this question indicated that they did lose revenue, while 49% indicated that they did not

lose revenue. The table below shows the number or respondents that lost revenue, in addition to the

estimated percentage of revenue lost.

Table 3: Lost Revenue due to Labour Shortages (2014)

Amount of Lost Revenue (% Categories)

Response Percent (%)

Response Count (#)

0% 49.3% 216

1 - 5% 18.9% 83

6 - 10% 14.6% 64

11 - 15% 9.6% 42

16 - 20% 4.3% 19

21 - 25% 1.6% 7

26 - 30% 0.7% 3

More than 30% 0.9% 4


Conclusions

A total of 462 valid responses were obtained through the survey. The survey responses represented a

range of business sizes and types throughout all regions of BC. Almost three quarters (73.8%) of

respondents operated on a year-round basis versus 26.2% that operated seasonally. The breakdown of

responses by the six sector categories used by go2HR was as follows.

40.0% Accommodation 7.6% Travel Services

27.9% Recreation 3.9% Transportation

17.3% Food and Beverage 3.2% Snow Sports

Just over 50% of respondents indicated they were not able to hire all of the people they needed in 2014.

The majority of unfilled positions were estimated to be in the Lower Skilled Worker category (56.6%),

while 30.7% were in the Higher Skilled Worker Category and 12.6% were in the Manager category.

The most commonly-cited implications of the inability to hire enough people were:

71.4% Staff burn-out 47.8% Missed business opportunities

70.5% Hired under-qualified staff 42.2% Increased business costs

54.6% Reduced customer services 35.7% Increased overtime

Over 11% of respondents indicated that they considered closing their business altogether due to the

labour constraints they experienced in 2014. Just over 50% of respondents indicated they lost revenue

in 2014 due to labour constraints.

33.5% of respondents lost in the range of 1% – 10% of total revenue.

15.5% of respondents lost in the range of 11% – 25% of total revenue.



Economic Impact Losses Due to Labour Constraints

Introduction

This section first presents the total estimated impacts resulting from tourism in the province, assuming

minimal labour constraints (see Analysis 1 below). This analysis is based on the initial direct tourism

spending in BC reported for 2013, which was $13.9 billion.

The section then discusses the results of Analysis 2. Analysis 2 presents the estimated economic impact

losses resulting from the lost revenue reported by survey respondents, as shown in the previous section.

Analysis 1: Total Tourism Impacts in BC Assuming Minimal Labour Constraints

The pivotal role tourism plays in the BC economy and its many contributions to showcasing the natural

beauty and history of the province are significant. Tourism spending in BC represents “new money”

that would not have been spent in BC if tourists – both residents and non-residents – were to choose

to visit another destination. Their impacts are, therefore, incremental, adding to BC’s Gross Domestic

Product (GDP), total provincial employment, and tax revenues to all three levels of government.

Expenditures and impacts are highlighted below

Tourist expenditures of residents and non-residents exceeded $13.9 billion in BC in 2013.

The direct contribution of tourism expenditures to BC’s GDP was over $7.3 billion in 2013 (in

2007 constant dollars and over $7.9 billion in 2013 dollars).

More than 132,200 British Columbians owe their direct jobs to the tourism industry which paid

$4.5 billion in wages and salaries, with an average annual compensation of $34,000.5

The resulting contribution to the provincial treasury was a substantial $980 million.

The direct contributions of the tourism industry, however large and substantive they are, fall short of

capturing the full and comprehensive contributions of this industry. A comprehensive accounting of

the tourism value in BC would also include the indirect and induced contributions of the industry as

these typically exceed the direct contributions.

The first analysis presented is the total economic impact of tourism, including the direct, indirect and

induced impacts, assuming minimal labour constraints. The economic and employment impacts in

2013 are shown below. The initial tourism expenditure of $13.9 billion generates considerably greater

impacts when the indirect and induced impacts are considered (see Table 4). Economic impact

definitions are provided in Appendix A.

5 This average annual compensation accounts for full-time and part-time jobs.



Table 4: Economic Impacts of BC Tourism (millions of 2013 dollars)

Initial Expenditure $13,900

Value Added (GDP)

Direct $7,908

Indirect & Induced $8,006

Total $15,914

Gross Output

Direct $13,900


Total $31,059

Wages & Salaries

Direct $4,488


Total $11,287

Employment

Direct 132,000

Indirect & Induced 153,475

Total 285,475

Taxes

Federal $3,808

Provincial $1,917

Local $353

Total $6,078

Imports

From Other Provinces $1,881

From Other Countries $1,951

Total $3,832

Source: Econometric Research Limited, 2016.

The indirect and induced impacts of tourism, as shown above, are large and relevant. Neglecting these

impacts would understate the contributions of tourism and could present a truncated picture of the

importance of the sector and its relevance to the economy and the people of BC.

Analysis 2: Tourism Economic Impacts and Losses Based on Labour Constraints

This analysis focuses on the relevant results from the online industry survey that delineated and

quantified the magnitude of business revenue losses associated with labour shortages. These revenue

losses were estimated by survey respondents based on their inability to operate at full capacity due to

staffing shortages, therefore forcing them to turn away business (and revenue). Based on the estimated

lost revenue, the study team estimated the direct, indirect and induced impacts associated with the lost

business revenue.

The analysis was conducted by region, by sector and by year-round versus seasonal businesses. Key

findings resulting from the analysis are as follows.



Compared to medium-sized businesses, small and relatively large businesses demonstrated

higher revenue losses attributed to labour shortages. The delineation of “small”, “medium”

and “relatively large” businesses used in this analysis is as follows:

o Small – under $250,000 in gross revenue

o Medium - $250,000 - $3,000,000 in gross revenue

o Relatively large - more than $3,000,000 million in gross revenue

When grossed up to the provincial level, business revenue losses were largest in the Vancouver

Coast and Mountains Region, followed by the Thompson Okanagan Region, the Northern BC

Region, the Kootenay Rockies Region, the Vancouver Island Region and, lastly, the Cariboo

Chilcotin Coast Region. The Vancouver Island Region reported the lowest per business

revenue loss resulting from labour shortages. This is consistent with industry feedback, which

indicated that the labour shortage issue does not seem to be as serious in the Vancouver Island

Region, relative to the other regions.

Based on the online survey results, the food and beverage sector experienced the largest

percentage revenue losses as a result of labour constraints. The average percentage losses by

sector were:

Food and beverage services:

Recreation and entertainment:

Transportation:

6.33%

4.60%

4.11%

Accommodation:

Snow sports:

Travel services:

3.56%

3.47%

3.36%

When analysed on a year-round versus seasonal business basis, the seasonal businesses lost

more revenue due to labour shortages on a percentage basis (percentage of total), while the

year-round businesses lost more revenue due to labour shortages on an absolute basis:

o Year-round operators lost an estimated $947.72 million in direct gross revenue (initial

expenditure) – representing average losses of 8.3%; and,

o Seasonal operators lost an estimated $238.25 million in direct gross revenue (initial

expenditure) – representing average losses of 9.6%.

The resulting estimated direct, indirect and induced impacts of the reported revenue losses for BC due

to labour shortages are shown below. Note that the results shown below represent the average of three

different analyses that are presented and discussed in the technical report. The three different analyses

were conducted on a regional, sectoral and seasonal basis.



Table 5: Economic Impacts of Revenue Loss Due to Labour Shortages in BC (millions of 2013 dollars)

Lost Revenue (Expenditures) Due to Labour Constraints and Resulting Lost Economic Impacts

Initial Expenditure $1,030

Value Added (GDP) Direct $586

Indirect & Induced $596

Total $1,183

Gross Output Direct $1,030


Total $2,302

Wages & Salaries Direct $371

Indirect & Induced $469

Total $840

Employment Direct 10,114

Indirect & Induced 11,213

Total 21,327

Taxes Federal $286

Provincial $144

Local $26

Total $456

Source: Econometric Research Limited

Conclusions

Overall, the study confirms that the BC tourism industry is facing labour constraints that are impacting

businesses. Just over 50% of those surveyed for this study indicated that they could not hire all the

people they needed to run their business and/or expand their business in 2014. The inability of these

businesses to operate at full capacity due to labour shortages resulted in an estimated $1,030 million in

lost tourism spending (or gross revenue) across the province. This, in turn, resulted in much larger

losses, when indirect and induced impacts were considered. Impacts were also felt with regard to lost

taxation revenue for all three levels of government.

In conclusion, the survey results confirmed the labour shortage issues that tourism industry

stakeholders have been articulating in recent years, and validated the issues documented in the British

Columbia Tourism Labour Market Strategy (2012 – 2016). The economic impact analysis conducted

through this study further demonstrated that the revenue (direct tourism spending) losses that

operators and businesses are experiencing due to labour shortages are having large and detrimental

impacts on the BC economy, particularly when the indirect and induced impacts are also shown. Based

on these findings, go2HR and its stakeholders need to collectively define the next steps required to

address the tourism industry’s labour market constraints.



.

Appendix A – Economic Impact Methodology and Key Terms

Background on Tourism Expenditures

Tourists come to BC from many locations within and outside the province and country. Some stay for

a short while, others for a longer period, but all spend money on food and beverage, accommodation,

souvenirs and transportation in the province.

Tourist expenditures of residents and non-residents exceeded $13.9 billion in BC in 2013.6 Most of

these expenditures represent “new money” in BC that would not have been spent if tourists – including

both residents and non-residents – were to visit elsewhere. Their impacts are, therefore, incremental

adding to BC’s Gross Domestic Product (GDP), total provincial employment, and tax revenues to all

three levels of government.

Tourism expenditures in 2013 generated a direct contribution to BC’s GDP of $7.3 billion (2007

constant dollars and over $7.9 billion in 2013 dollars), 132,200 direct jobs, $4.5 billion in wages and

salaries, with an average compensation per employee of $34,000, a substantial $980 million in provincial

taxes, and over $3.2 billion in export revenues.7

These contributions to the economy compare favourably with the contributions of other primary

resource industries in BC, including forestry, agriculture and fishing, mining, and oil and gas extraction.8

The direct contributions of the BC tourism industry, however large and substantive they are, fall short

of capturing the industry’s full and comprehensive contributions to the provincial and regional

economies. Comprehensive accounting of the tourism value in BC would require a full impact analysis

as the indirect and induced contributions of the industry often exceed the direct contributions.

Focusing solely on the direct contributions would give a truncated picture of the role and importance

of tourism to the economy of the province.

This study estimates direct, indirect and induced impacts resulting from resident and non-resident

tourism activity in BC.

6 BC Statistics, 2013. 7 Destination British Columbia, The Value of Tourism in British Columbia (using 2013 data), 2015. 8 BC Statistics (http://www.bcstats.gov.bc.ca/StatisticsBySubject/Economy/EconomicAccounts.aspx, 2002-2012, chained

2007$).



.

Approach to Estimating Direct, Indirect and Induced Impacts

The economic impact analysis specifically estimates the total (direct, indirect and induced) output,

employment and taxes paid to all levels of government on the economic impacts of tourism. The large

indirect (secondary) and induced (tertiary) impacts define the ripple effects to be expected from any

expansion or contraction in the tourism industry’s products and services. While the major economic

impacts will be more pronounced in the accommodation and food and beverage sectors, these impacts

can also be felt in other sectors as businesses and workers affected by the impacts scale back their

activities and spending in the broader economy.

Regional Input-Output Model

The consulting team, and specifically Econometric Research Limited (ERL), has developed a regional

input output model based on data produced by Statistics Canada. This model is designed to capture,

quantify and trace impacts on income, output, and employment by sector (39 sectors) and over 10

different taxes by the levels of government collecting them.

Analysis Assuming No Labour Shortages

Benchmarking the tourism industry’s contributions to the BC economy assuming minimal labour

shortages was the first task of the analysis. Measures of tourism contributions to the BC economy

went further than the direct effects and included indirect and induced impacts.

Analysis Assuming Various Levels of Labour Shortages (different scenarios)

Labour shortages were then introduced to estimate the consequences of different scenarios and

alternative projections of labour shortages. When there is uncertainty about future developments (e.g.,

extent of labour shortages), it is best to use scenarios where the future is bracketed by a number of

likely and reasonable scenarios. While it is difficult to assign any probability measure to these scenarios,

they remain useful in outlining a menu of likely eventualities. The scenario presented in this Summary

Report is described below.

Scenario based on the go2HR Tourism Economic Impact Labour Shortage survey

results: The survey results were profiled earlier in the report9. The survey results were used to

identify and estimate tourism revenues lost by season, region and sector, and the resulting

losses in direct, indirect and induced impacts.

Economic Impact Analysis Methodology

The methodology used in the economic impact analysis is based on a hybrid integration of:

Input-output analysis;

Location theory; and,

Relevant segments of typical macroeconomic models.

Statistics Canada generates the interprovincial input output tables and the BC supply, use and final

demand data are incorporated into the model. 10

9 go2HR BC Tourism Labour Shortage Economic Impact Survey, Grant Thornton, 2016. 10 Supply, use and final demand are tables that Statistics Canada produces the IO data for BC. These are used in the economic impact model prepared by Economic Research Limited.



.

Location theory is used to regionalize the model (enabling analysis for the six tourism regions) as

Statistics Canada only generates the province-wide data. A simple consumption function is

incorporated as well as an import equation and a tax function in order to generate the induced impacts.

A dollar spent by a tourist on food and beverage or accommodation circulates and re-circulates within

the economy, multiplying the effects of the original expenditures on overall economic activity. This

process is referred to as the economic multiplier effect. It operates at several levels, as described below.

The initial tourist expenditures on products and services are generally referred to as the direct

costs of operation and their effects are referred to as the initial (direct) effects.

Subsequent purchases by suppliers of materials and services to sustain the original and

derivative expenditures are called the indirect effects.

The induced effects emerge when workers in the sectors stimulated by initial and indirect

expenditures spend their additional income on consumer goods and services.

The impact model used is a special and proprietary application of an interregional impact model (RIM:

Canada) developed by ERL. It is a unique model in that it captures the economic impact of different

activities at the local, provincial, and the national level. The local impacts are a special feature of the

ERL model that few other systems can duplicate.

The model utilizes a large set of economic and technical databases besides the interprovincial input

output tables. A short list includes employment by sector, taxes by type of tax and the level of

government collecting it, prices of products, and location coefficients.

The expected impacts are estimated in terms of:

BC GDP (value added or income);

Total gross output (sales);

Wages and salaries;

Employment;

Taxes by level of government and in terms of five major tax categories; and,

Imports.

The output and employment impacts are allocated over the standard 39 sectors of Statistics Canada's

Input-Output model for BC.

Some of the key impact indicators generated by these models are defined below to assist the reader in

interpreting the results of the economic impact analysis.

Value Added (GDP) – This represents net output generated by the initial expenditures in the

province. It is typically the sum of wages, rent, interest and profits in addition to indirect

business taxes and depreciation minus subsidies.

Employment – This refers to the total jobs generated by the activity expenditures.



.

Taxes – Our impact system generates estimates for a large number of taxes (income taxes,

goods and services tax (GST), provincial services tax (PST), liquor and tobacco taxes, and

others), each of which is linked with the level of government receiving it. For example, the

Federal government receives the proceeds from the GST, the Provincial government receives

the tobacco and liquor taxes and the PST, and the local governments receive the property and

business tax.

Imports – These represent the goods and services acquired from outside the province to

sustain the activities of the facilities. They essentially represent leakages from the province.

Multipliers – These are summary measures that represent the division of the total impacts

(direct, indirect and induced) by the initial expenditures. For example, the income multiplier

associated with the total operational expenditures of a farm is calculated by dividing the total

income (value added) impact by the initial operating expenditures. The only exception is that of

the employment multiplier where total employment is divided by direct employment in order

to preserve the common units.

Economic impact analysis is the appropriate mathematical tool for quantifying the economic impacts of

tourism expansions and/or contractions given its capacity to model the patterns and magnitudes of

interdependence among sectors and activities. It is one of several social accounting systems that can be

used to evaluate programs, projects and activities in terms of a suite of non-market criteria. Impact

analysis is typically predicated on three fundamental propositions that are particularly relevant to this

study:

Regardless of the inherent value of primary activities such as the creation of employment or the

showcasing of BC’s natural beauty and culture, these activities generate socio-economic

consequences that are important to regions, communities and provincial policy makers. These

impacts go beyond the customary outcomes of profits or returns on investment.

These socio-economic impacts are quantifiable and can be measured and compared within the

same platform.

Economic impacts are only partially captured by assessing the outcomes generated by direct

expenditures and impacts. The economy is a complex whole of interdependent and interacting

activities; there are significant indirect and induced impacts associated with the direct

expenditure that should be quantified and included in the assessment of the contributions of

activities and sectors. These indirect and induced impacts are often larger than the direct

impacts.



.

Appendix B – Survey

1

go2HR has retained Grant Thornton and Econometric Research Limited, two professional consulting and research companies, to measure the economic impact of labour shortages in the province and in your region. The following survey, and resulting information, will be used to:

Gain a solid understanding of the economic potential of tourism and hospitality businesses in British Columbia ("BC");

Gain a solid understanding of how labour shortages are impacting tourism and hospitality businesses; and,

Estimate the potential economic losses to regional and provincial economies resulting from tourism and hospitality businesses that are unable to fill certain positions and, as a result, are not able to operate at full capacity.

Your experiences and views are very important to the successful completion of this study. Please be assured that all your responses will be kept completely anonymous and confidential. Grant Thornton and Econometric Research Limited will only provide aggregate survey results in the report. Neither go2HR nor your association will be able to view your responses to this survey.

The survey will take approximately 15 minutes to complete. Kindly complete the survey by February 12th, 2016. If you have any questions, please contact:

• Debbie Yule, go2HR: 604 663-9787 (ext 228) or [email protected] • Jennifer Nichol, Grant Thornton LLP 604 443-2146 or [email protected]

Notes:

If you are unable to complete the survey in a single session, you can continue the survey at a later date or update your answers by clicking on the same link.

If you have received this survey twice, please accept our apologies. We have used multiple associations to distribute this survey to ensure we reach as many operators as possible.

This survey covers the 2014 calendar year. If you operate your business using a fiscal year, please use 2014/2015 fiscal year information.

go2HR BC Tourism Labour Shortage Economic Impact Survey

mailto:[email protected]

mailto:[email protected]

2

A. PRELIMINARY INFORMATION

Please note that all questions with an asterisk (*) require an answer to complete the survey.

* 1. Name of Business

* 2. Location of Main Office (City or Town)

3. Name of Person Completing Survey

4. Job Title

5. Phone#

* 6. Would you like a summary of the aggregate survey results?

Yes No

If Yes, please provide your email address:

go2HR BC Tourism Labour Shortage Economic Impact Survey

SURVEY STRICTLY CONFIDENTIAL

3

B. COMPANY DESCRIPTION

* 7. The ownership of your business is best described as:

Sole Proprietor

Partnership

Corporation

Franchisee

Public Sector Operation (e.g., government operated conference centre, museum, park, etc.)

Non-profit Society (e.g., society operated museum, etc.)

* 8. Which of the following industries characterizes the primary category to which your business/operation belongs? Please note that these are the standard industry categories used by go2HR.

Accommodation

Food and Beverage Services

Recreation and Entertainment

Snow Sports

Transportation

Travel Services

* 9. Please indicate more specifically your type(s) of business/operation.

(e.g. restaurant, attraction, camp ground, ski hill, sport fishing, lodge, backcountry lodge, hotel, fishing resort, kayak touring, marina operator, museum, boat tours, whitewater rafting, heritage tour, etc.)

* 10. How many years has this business been in operation?

* 11. Is this business operated on a year round or on a seasonal basis?

Year Round (12 m onths) Seasonal

12. If seasonal, please indicate ALL months in which you operate, including those that you may only operate in partially.

January

February

March

April

May

June

July

August

September

October

November

December

4

* 13. In which of the following tourism regions does your business operate?

Northern BC

Cariboo Chilcotin Coast

Thompson Okanagan

Kootenay Rockies

Vancouver, Coast & Mountains

Vancouver Island

C. EMPLOYEES

* 14. During 2014, how many people were employed in your operation in the following types of positions?

Count yourself or other family members if you or they worked in the operation.

Full Year/Full-Time

Full Year/Part-Time*

Part Year/Full-Time

Part Year/Part-Time*

Total Employees in 2014

* "Part-Time" is considered less than 35 hours per week.

* 15. What percentage of your employees during 2014 fell within the following categories?Please DO NOT input the % sign as this is assumed.

Canadians who are fully-qualified for the position

Canadians who are partially-qualified for the position

Temporary foreign workers

Working holiday visa holders

Vacant positions

Other

Total

100%

16. If you selected "Other", please indicate the category.

5

D. COMPANY SIZE

* 17. Please indicate from the dropdown box which gross revenue category is applicable for your business

for 2014.

18. Approximately how many guests can be served by your operation at any given time?

E. VISITOR VOLUME AND MIX

19. Approximately how many guests did you have in 2014?

* 20. Approximately what percentage of the total number of guests during 2014 came from the following areas? Please DO NOT input the % sign as this is assumed.

Your tourism region(s)

Other tourism regions in BC

Other Canada

U.S.A.

Europe

Other

Total

100%

F. LABOUR SHORTAGES

* 21. Were you able to hire all the people you wanted to hire in 2014?

Yes No

* 22. If No, how many people were you unable to hire in 2014?

6

* 23. Please indicate the estimated number of unfilled positions in 2014 in the following categories.

Managers (e.g., Food and Beverage Manager, Front Office Manager, Human Resources Manager, etc.)

Higher Skilled Workers (e.g., Ski Instructor, Chef, Pilot, Accountant, etc.)

Lower Skilled Workers (e.g., House Keeping Room Attendant, Bell Person, etc.)

* 24. Please indicate the types of positions that were vacant in 2014. Click all that apply.

Manager/Supervisor

Clerk/Cashier

Front Desk Agent

Guest Services Agent

Bell Person

Housekeeping Room Attendant

Chef

Cook

Prep Cook/Kitchen Helper

Bartender

Server

Dishwasher

Maintenance Technician

Tradesperson

Guide

Ski Instructor

Other

If you clicked Other, please specify.

* 25. Of the above positions listed in Question 24, please rank the top three positions that were the most

difficult to fill in 2014.

#1

#2

#3

7

* 26. How many of the unfilled positions were there in each of the following categories in 2014?

Full Year/Full-Time

Full Year/Part-Time*

Part Year/Full-Time

Part Year/Part-Time*

Total Unfilled Positions in 2014

* "Part-Time" is considered less than 35 hours per week.

* 27. Did you encounter a significant labour shortage problem before 2014?

Yes No

28. If Yes, when did you first encounter significant labour shortage challenges?

Before 2012

2012

2013

29. How has your business been impacted by the labour shortages? Please click all that apply.

Reduced customer service

Increased business costs

Increased overtime (O/T)

Staff burn-out

Reduced business hours

Missed business opportunities

Delayed business expansion

Hired under-qualified staff

Increased automation

Considered business closure

Other (please describe)

8

30. If you clicked "Missed business opportunities" as an impact of the labour shortages, please describe.

* 32. Approximately what percentage (%) of your business did you lose in 2014 due to labour shortages?

33. If you lost business, approximately how much revenue did you lose in 2014 due to labour shortages?

Estimated lost revenue in 2014: $

G. CLOSING COMMENTS

* 34. Would you be willing to discuss labour shortage challenges further over the telephone?

Yes No

If yes, please provide phone number.

35. Do you have any other comments about the impact of labour shortages in your region, your specific industry or British Columbia as a whole? If these comments are important to you, they will be valuable for our study.

You can edit your responses later, if needed, by clicking on the same link.

THANK YOU VERY MUCH FOR YOUR HELP!



.

Appendix C – Limitations

The following limitations have guided our approach and the findings of our analysis for this economic

impact study.

An effort has been made to ensure that the lost revenues and impact estimates in the report are made in a conservative manner (e.g., estimates were not provided for the longer-term) to avoid overstating the results.

Benefits are not always easily expressed in monetary terms. For example, social and cultural benefits and costs from tourism are not easily measured. We focus in this report on the quantitative impacts.

Due to fiscal and time constraints, our research program for this study did not include randomly selected surveys to British Columbia (BC) visitors or to business operators in BC communities to determine spending or revenue loss patterns. Assumptions were made and estimates were based on a limited number (462) of survey responses obtained through an online survey. The survey was conducted across BC, with the assistance of relevant associations that provided the online survey link to their members and/or stakeholders. There is no claim here that the sample results are unbiased representations of the underlying populations. The results based on these surveys should therefore be treated with caution, particularly where the sample size was small (e.g., for the regional and sectoral results).

The impact results are based on data compiled from a variety of sources, including the results of the online survey. The margin of error is different for each set of data and application; therefore, the intention of this caveat is to draw the attention of the reader to the existence of possible margins of error and to caution them about their existence.

The impact model used is a simulation model and, as such, it creates a theoretical picture of the future of the provincial and regional economies; it does this on the basis of a series of assumptions, which may or may not hold true over time.

A scenario approach was adopted to deal with uncertainty. No attempt was made to estimate

the probability density functions and levels of confidence. Instead a few scenarios were

constructed to probe the sensitivity of the results to different parameter estimates.



.

Appendix D – Sector Associations & RDMOs

Key representatives from each of the following organizations were interviewed to gain an

understanding about the extent of labour shortage issues within their respective sectors or regions. In

addition to the interviews, representatives from these associations and regional destination marketing

organizations (RDMOs) distributed the online survey link to their members/stakeholders to support

this project.

Tourism Associations

Canada West Ski Areas Association

Backcountry Lodges Association of BC

Camping & RV BC Coalition

British Columbia Hotel Association

BC Fishing Resorts & Outfitters Association

Sport Fishing Institute of BC

BC Garden Tourism Coalition

British Columbia Golf Marketing Alliance

National Golf Course Owners of Canada

Association,

BC Chapter

British Columbia Guest Ranchers Association

Western Canada Mountain Bike Tourism

Association

BC Ocean Boating Tourism Association

BC Wine Institute

Helicat Canada Association

Sea Kayak Guides Alliance of BC

Snowmobile BC

Wilderness Tourism Association

British Columbia River Outfitters Association

Guide Outfitters Association of BC

Aboriginal Tourism Association of BC

BC Restaurant & Food Services Association

BC Museums Association

Tourism Industry Association of BC

RDMOs

Kootenay Rockies

Northern British Columbia

Cariboo Chilcotin Coast

Thompson Okanagan

Vancouver Island

Vancouver, Coast & Mountains (through Destination BC)


www.GrantThornton.ca

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